Take-Two chairman Strauss Zelnick, speaking at the 2008 Smid Cap Conference today, is explaining why his company is rejecting EA's offer to purchase the company for $26/share. In the process, he is detailing Take-Two developers' past successes, current projects and future opportunities.

Take-Two announced this morning that the company's board of directors has rejected EA's offer to purchase shares of the company at $26/share. Take-Two calls the offer "inadequate."

The release states:

The Board also confirmed that it will explore alternatives to maximize value for stockholders, which may include a business combination with third parties or with EA, remaining independent, or other strategic or financial alternatives that could deliver higher stockholder value than the current EA offer.

One interesting bit identifies what Take-Two actually would expect out of a combined EA-TakeTwo:

Potential synergies related to a proposed combination include: realizing a sales uplift as a result of a broader reach of distribution infrastructure; leveraging investments in online, wireless and other evolving platforms; optimizing sports offerings; and reducing sales, general and administrative costs significantly.

Today in a conference call held by the Take-Two Interactive to discuss financial results for the first quarter of fiscal 2008, the company revealed that "BioShock 2" will be released in 2009, courtesy of a team that's not quite the one that made the first "BioShock."

Ken Levine, lead creator of the original will have a hand in 2009's "BioShock 2." Primary development of the game, however, won't be done by Levine's team at 2K Boston, but by the newly formed 2K Marin.

"Ken is a terrific asset in the company," CEO Ben Feder stated. "He's a brilliant game developer. We're really excited to have him. He will be working on 'BioShock 2' and he will be working on a new IP. A lot of the work will be done at 2K Marin, but that's not to say that Ken is not involved. We think he's critical to 'BioShock' and he's critical to new IP in the company."

On 2K Boston and 2K Australia, the studios behind the first game: "They're working on another game."

Other news from Take-Two's earnings call, including bits about Rockstar and the EA buy-out attempt follow...

The past few days have not been the relaxing post-GDC weekend hoped for by the Multiplayer crew. Thanks, Electronic Arts!

The blogosphere has been digging deep into EA's public attempt to purchaseTake-Two Interactive, but while most of the world is wondering "what's next?," Multiplayer figured it was worth a trip into the past, too.

How did a company responsible for some of our industry's most influential and controversial video games become a source of financial instability and a revolving door of managerial problems?

Take-Two emerged in 1994 with FMV-heavy adventure game "Hell: A Cyberpunk Thriller" (a project we're sure Dennis Hopper was quick to forget) and 3D space combat title "Star Crusader." Both actually appeared on the ill-conceived 3DO platform.

Their first notable move -- in retrospect, at least -- came during the release of 1996's "Grand Theft Auto" from then-DMA Design (who they eventually purchased in 1998, when picking up BMG Entertainment's games division). Knowing how big the series would eventually become, the box art's description of the game is especially funny:

While Take-Two is best known for "GTA" these days, that hasn't always been the case. Read on for more about how Take-Two became the Take-Two of today, and a look at the strangely simultaneous rise of "GTA" and corruption within the publisher's upper echelons.

In a conference call to further detail plans to purchase Take-Two Interactive, EA CEO John Riccitiello offered some insight about his plans for the combined company, if the deal went through.

First of note for gamers is that Riccitiello said "I wouldn't change a line of code in 'BioShock' nor would I in 'GTA' or 'Max Payne'... what we would do is sell more of it." He said EA's distribution network could get those games in places Take-Two doesn't reach.

He also said the purchase was enticing for EA because his current company is "underrepresented in M-rated content." Getting the creators of "GTA," he noted, would suddenly give EA the top M-rated content in the world.

Riccitiello also name-checked Sid Meier of Firaxis and Greg Thomas of 2K Sports studio Visual Concepts and as valued members of Take-Two. Regarding the potential combination of EA and Take-Two's sports business, Riccitiello said that he thought highly of Thomas but that "in terms of the sports business, from any sort of organizational perspective, we think it is way too early to comment." He also shot down the idea that the purchase would leave EA without competition in sports, naming "Wii Sports" and "Hot Shots Golf" among the company's apparent rivals.

The lion's share of Riccitiello's praise during the call was for the top men at Rockstar Games, whose distinct publishing labels were cited as an inspiration for EA's current structural division. Financial analysts on the call tried to get Riccitiello to address their feelings that it would be expensive to bring Rockstar Games' management into the EA fold, but the EA CEO said the conference call wasn't the proper forum to discuss how EA could pull that off.

Riccitiello did reveal that EA's interest in Take-Two goes back quite a bit. He said that his first inquiry into Take-Two began last summer and noted that he put the brakes on an attempt by EA to buy Take-Two when he took his CEO spot at EA last April. "At the 11th hour I recommend the board not to pursue it," he said. He felt his own company needed to shift its own structure into its current four-division set-up before taking on Take-Two.

Riccitiello and CFO Warren Jenson also stated on the call that they were surprised at Take-Two's rejection of EA's offer. "It is our objective to make this a friendly deal," Jenson said. They said they expected someone to buy Take-Two, whether it's EA or not.

(On a side note, tomorrow will mark one year since Riccitiello was announced as the next CEO of EA, though he didn't assume the position until April. The executive has written quite a first year for himself at the publishing giant. )

EA has also put up a website answering some of our questions about what it would do with Take-Two; we also got Wedbush Morgan Securities analyst Michael Pachter to comment on what he thinks is an inevitable purchase.

Clearly, this possible merger concerns gamers. EA has been criticized for buying small development studios with successful IPs, only to have them produce second-rate titles following the acquisitions. The company has also been known to close down acquired studios if their titles don't sell well.

In fact, at the DICE Summit held in early February, we reported that EA CEO John Riccitiello admitted that EA "blew it" when it came to keeping top-notch studios such as Origin, Bullfrog and Westwood prosperous; all three studios are now defunct.

With that in mind, we decided to put together an overview of EA's previous development studio purchases:

When big financial news is breaking in the gaming industry, I look to Wedbush Morgan Securities analyst Michael Pachter to break things down. I caught him on the phone today while he was having brunch at a yacht club (the same yacht club he was last brunching at when the Activision Blizzard deal was announced).

Who is this EA-Take Two deal good for? What would happen with sports and the cost of sports games? And why does he think Rockstar won't necessarily be a part of the deal?

As part of its public announcement to purchase Take-Two Interactive today, game publisher Electronic Arts has launched a website that addresses the possible fates of the most prominent parts of Take-Two's business. You can read the lengthy EA-to-EA interview at EATake2.com, but here's how they answered a few of our questions:

Would this deal mess with the makers of "Grand Theft Auto"? EA asks and answers as follows:

Do you intend to kill or restrict any of the R* franchises?
We strongly believe that behind all the controversy is a core of great intellectual property and development talent. These titles don’t sell millions because they’re controversial; they sell because they’re great games. We have no plans to change that.

But doesn't EA already have a sports division? So wouldn't this crush Take-Two's baseball, basketball and hockey franchises?

Would you kill 2K Sports?
Any integration starts with our respect for the teams and people that make great games. Beyond that, it’s too early to discuss plans for managing Take-Two.

EA just bought Pandemic and BioWare, so why reach for Take-Two now?

Why now?
We’ve waited to ensure that our proposal did not disrupt development on GTA IV. The game is scheduled to launch in about two months, which means the core development should be essentially complete.

At the same time, the reorganization of the EA Labels is basically done and our newest studios – BioWare and Pandemic – are settling in. Under the reorganization, creative teams at EA have a new sense of freedom and responsibility. There are more brand-new titles in development today than at any time in our history.

Finally, this is a good time to align our publishing strengths to Take-Two’s game roster. A timely integration would give a big boost to Take-Two’s games that are scheduled for release later this year and for their entire catalog leading into the holidays.

Okay, gamers, time for you to weigh in. Which games' fates and which studios' futures are you most curious about?

Video game publisher Electronic Arts announced today that it is attempting to buy Take-Two Interactive, publisher of "Grand Theft Auto," "BioShock" and the 2K Sports line in a stock purchase valued at $2 billion.

The announcement stems from a post-Valentine's Day February 15 rejection by Take-Two Interactive executive chairman Strauss Zelnick of EA's initial offer and a subsequent rejection of a second one offered on February 19.

As a result EA is taking the issue public. CEO John Riccitiello said in today in a press release detailing the deal: "Our all-cash proposal is a unique opportunity for Take-Two shareholders to realize immediate value at a substantial premium, while creating long-term value for EA shareholders. Take-Two’s game designers would also benefit from EA’s financial resources, stable, game-focused management team, and strong global publishing capabilities."

EA's attempt to purchase Take-Two Interactive comes less than three months after Activision and Vivendi announced their plans to merge into a company called Activision Blizzard in a deal valued at $18.9 billion.

We've put in requests for comment to Take-Two and Rockstar. EA will be holding an 8AM eastern time tomorrow to further discuss the company's hopes for its planned purchase.

[UPDATE: Feb 24, 5:11PM ET]

In response to EA's online charm offensive seemingly aimed at Take-Two Interactive's stockholders, the Board of Directors at Take-Two has issued a press release detailing their rejection. Calling the $26 per share offer "inadequate inadequate in multiple respects and not in the best interests of Take-Two's stockholders," they say that EA's proposal "substantially undervalues" their company.

Regarding "GTA IV" Take-Two's Zelnick stated: "We offered to initiate discussions with EA on April 30th, 2008 (the day after 'Grand Theft Auto IV' is scheduled to release). We believe this offer demonstrated our commitment to pursuing all avenues to maximize stockholder value, while we believe that EA's refusal to entertain this path is evidence of their desire to acquire Take-Two at a significant discount, whereas we believe this value rightly belongs to our stockholders."